- RXR and TF Cornerstone are applying for up to $4.84B in federal financing to support the development of their Midtown East supertall, 175 Park Avenue.
- The financing would come from the Transportation Infrastructure Finance and Innovation Act (TIFIA) and Railroad Rehabilitation and Improvement Financing programs.
- The developers plan to contribute $550M to transit improvements around Grand Central Terminal as part of their financing request.
- Due to the absence of an anchor tenant and a lack of interest from traditional lenders, the developers are turning to the government for support.
- The 92-story, $6.5B 175 Park Avenue will feature 2.5 MSF of office space, a 200-room Hyatt hotel, and retail space.
RXR Realty (RXR) and TF Cornerstone, two prominent New York-based developers, are seeking up to $4.84B in federal loans to fund their ambitious 175 Park Avenue project in Midtown East, as reported by The Real Deal.
The developers applied for the funding under a program designed to support transportation infrastructure, believing the large-scale office and hotel tower, close to Grand Central Terminal, qualify for this financing.
Funding Details
175 Park Avenue is a planned 1,575-foot-tall supertall tower that combines 2.5 MSF of office space, a 200-room Hyatt hotel, and 10 KSF of retail.
The developers hope to access funds through the Transportation Infrastructure Finance and Innovation Act (TIFIA) and Railroad Rehabilitation and Improvement Financing programs, which offer low-cost loans with payback periods of up to 35 years.
These programs have a combined $30B in available funds, and RXR and TF Cornerstone are targeting a share to help finance the development.
As part of the request, the developers have committed to contributing $550M to transit improvements around Grand Central Terminal. However, the federal government is not obligated to approve the full amount or any of the funding requests.
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The Bigger Picture
The move to federal financing comes as traditional lenders, including banks and debt funds, have grown more wary of office development projects due to market uncertainty, particularly as remote work trends continue to reshape the CRE landscape.
Despite this, the scale of 175 Park Avenue and its potential to reshape the Midtown East area have led RXR and TF Cornerstone to seek out innovative financing solutions.
Without an anchor tenant for the development—an essential component that could help reassure lenders—the developers could have a hard time securing conventional financing for the $6.5B project. In comparison, One Vanderbilt, another high-profile office project, secured $1.5B in construction loans from six different lenders in 2016.
What’s Next
RXR and TF Cornerstone await the new administration to consider their financing request. The developers have already sent a draft letter of interest to the federal government and plan to engage with the president-elect at the appropriate time.
As they await the decision, the developers continue to push forward with the leasing effort for 175 Park Avenue, which they hope will attract tenants once the financing and construction are underway.
